Banks History Pakistan

At the time of partition, the total number of commercial banks was 38, out of these: the Pakistan banks were 2; Indian banks 29 while the exchange & the total deposits of Pakistan banks stood at Rs. 880 million whereas the advances were Rs. 198 million.

Before the partition of sub-continent, the entire banking business was almost controlled and managed by non-Muslims. The Muslims were deliberately kept cut of banking profession by the healthy Hindu community.When Hindu capitalists became sure of the division of sub-continent: they secretly began transferring their capital to the safe place in India, this act of Hindus had a when Pakistan declared an independent state in august 1947. The fund and other valuables were transferred at an accelerated pace to India. There was mass scale migration of non-Muslims from West Pakistan to India, which also caused the drain on the bank deposits.The Hindus in order to rain the economy of the newly established state closed down most of head offices and the branches of the scheduled and non-scheduled banks in Pakistan.

The number of scheduled banks branches were reduced from 619 to 213 only both wings of the country after independence. The non-schedules banks also suffered a severe jolt and their number was reduced from 411 to 106 over the same period. West Pakistan where there was greater exodus of non-Muslims to India suffered a great deal as a number of branches fall down from 487 to 69.In the East Pakistan though the number of branches were not closed in such a great number as in West Pakistan, a large number of portion of the deposit were withdrawn from the banks and transferred to India by the non-Muslims. The mass scale closure of branches and with drawl of the deposits caused a dead lock in the banking business in Pakistan.

The government of Pakistan was quite aware of the serious banking situation caused by the withdrawal of deposits and whole scale migration of banking staffs to India.It took up the challenge and started recognizing the crippled banking immediately after partition. A moratorium of free months was also allowed to banks that had financial difficulty due to sudden with drawl of deposits. In addition to above the following arrangements were made for facilitating settlement of claims by the governments. Each bank was to declare on to its offices both in India and Pakistan as clearing house for transfer of accounts.

Each bank was open at least one central office in Pakistan Where it could consolidate work of all its branches and Start paying out to depositors. The government took some effective measures for providing banking Training facilities to Muslims. There were some complaints that Hindu banks were not honoring thecheques of Pakistani national and were also refusing to give securitieskept in their custody. The government issued an ordinance whichempowered it to investigate all such complaints and if satisfied of their bonafides, the payment should be realized.In case the bank insisted onnon-payments, the government should realize the assets of the banks,which were sufficient to discharge such liabilities.

The government of Pakistan also allowed the removal of Valuables, kept in save depositsvaults and lockers by Submitting an application and getting necessaryapproval from the custodian of evacuee property. The government of Pakistan tried to provide all kinds of facilities withsincerity to the known Muslims bankers for restoring normal bankingfacilities in the country but the response was discouraging.An inter dominion agreement was reached between India and Pakistan in April1949. The main provisions of the agreement were as under; The inter dominion agreement could not be fully implemented.

? India delayed the transfer of Muslim deposits to Pakistan. ? The non devaluations decision of Pakistan government further ledto the suspension of remittance facilities through normal bankingchannels Due to panicky with drawl of deposits; some banks went into liquidationand the payments could not be made to the depositors.In order toregulate the both of banking on sound footing, the following measureswere taken to develop the banking system in Pakistan. The state bank of Pakistan which is the central bank of the country wasestablished in July 1948. The national bank of Pakistan was establishedon 1949.

This bank is to serve as an agent to the SBP in the areas,where SBP has no set-up. The industrial development bank of Pakistan was set up on August 1,1961 with a paid up capital of Rs; five crore. The agricultural development bank of Pakistan (ADBP) was set up in1961.It provides short, medium and long term loans to the farmers.

InJan, 1974 the entire commercial banks were nationalized. Thecommercial banks were merged with stronger once and in all five major banking companies were formed. MCB and ABL have again beenprivatized. The Pakistan banking council was set up for coordinating the activities of the nationalized commercial banks. The banking council formulates thepolicies and guidelines for the banks that has been dissolved innationalized.